Correlation Between Melia Hotels and Telefonica
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Telefonica at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Melia Hotels and Telefonica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Telefonica, you can compare the effects of market volatilities on Melia Hotels and Telefonica and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Melia Hotels with a short position of Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Telefonica.
Diversification Opportunities for Melia Hotels and Telefonica
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Melia and Telefonica is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Telefonica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica and Melia Hotels is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Melia Hotels are associated (or correlated) with Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica has no effect on the direction of Melia Hotels i.e., Melia Hotels and Telefonica go up and down completely randomly.
Pair Corralation between Melia Hotels and Telefonica
Assuming the 90 days trading horizon Melia Hotels is expected to generate 1.25 times more return on investment than Telefonica. However, Melia Hotels is 1.25 times more volatile than Telefonica. It trades about 0.05 of its potential returns per unit of risk. Telefonica is currently generating about 0.06 per unit of risk. If you would invest 657.00 in Melia Hotels on September 2, 2024 and sell it today you would earn a total of 20.00 from holding Melia Hotels or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Telefonica
Performance |
| Timeline |
| Melia Hotels |
| Telefonica |
Melia Hotels and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Telefonica
The main advantage of trading using opposite Melia Hotels and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Telefonica can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Telefonica will offset losses from the drop in Telefonica's long position.| Melia Hotels vs. International Consolidated Airlines | Melia Hotels vs. Merlin Properties SOCIMI | Melia Hotels vs. Aena SA | Melia Hotels vs. Acerinox |
| Telefonica vs. Banco Santander | Telefonica vs. Repsol | Telefonica vs. Iberdrola SA | Telefonica vs. Banco Bilbao Vizcaya |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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